Recent Posts

About

As the debt-ceiling discussion winds down in Washington and everyone laments over the meaning and mutual downside of compromise, our attention should start to turn to a more frightening problem -- the economy is not growing.

Sure, default is off the table now. But the backdrop is negative, and all the hope in the world doesn't change the math. As Jim Cramer of CNBC says, "Hope is never a strategy."

The real problem is demand. After all, if you don't have a job, you're not buying much. And the only real way for the country to solve this problem is to grow the economy.

In the meantime, those who are weathering the storm best are those who have saved along the way. You can never go wrong with self-control. I hope that one person with that mindset lives under your roof and it's now giving you the comfort to ride out these turbulent times.

#1. Cash is king: At DailyFinance we often hear from people looking to earn more interest on their savings. But here's the key: you have savings. What an enviable position to be in. For every year you lived in the less-expensive apartment or neighborhood; for every month you drove the car that wasn't as luxurious as the one in the next lane; for every season you spent more time reviewing your personal finances than planning your family vacation, you've earned a better night's sleep now. The sons and daughters of Depression-era parents seem to inherently get this, but the culture of saving has been largely lost on subsequent generations, many of whom are experiencing a pretty steep learning curve now.

#2. Ridiculous: According to a new Pew poll in The Washington Post, the debt-ceiling debacle has damaged political reputations. "Ridiculous" is the word that comes most frequently to mind when describing the charades in the capitol. This has given Republicans an opening. Mitt Romney was notably absent or -- in a Mittness Protection Program as some have deemed -- during the discussions, but the incredibly telegenic Margaret Hoover was everywhere. He should hire her immediately for his campaign.

#3. Leave us alone: Companies are looking for clarity. They want the space to make decisions, especially when it comes to their most significant cost -- personnel. We recently spoke with Brian Hamilton, CEO of financial-analysis firm Sageworks, about small businesses' hesitancy to hire full-time workers. The overwhelming sentiment about government intervention in the economy is "leave us alone," he says.

#4. Their house is not like our house: Here's the inverse scenario, which suggests that the government should ramp up the stimulus a la World War II. Did Obama underdo it? What should a re-do look like, especially when you consider that his house is not like our house. As Rana Foroohar of Time explains, the president may have to spend his way to growth -- following Keynesian economics -- while, for regular U.S. households, spending would be reckless. It turns out, the simplistic argument that "you have to balance your budget, they should have to balance theirs" isn't really all that relevant.

First of all it's amazing that you are capable of thinking. And as far as your question about a retired loser with the brain function of a 5 year old, if that were to be true, then that would mean that you and I have alot incommon dear. Thanks once again for proving my point that we liberals are a mean spirited bunch.

Your Bush derangement syndrome is getting the best of you dear. Most of the spending during the Bush years came from my extreme out of control reckless spending. Please give credit where credit is due.

Really? Pelosi was in charge when Bush rammed the medicare drug program thru? You know the one that gave big Pharma a nice juicy plum on the backs of the taxpayers? I think your braincells have lost it, dear.

Lost brain cells? Chrissy once again you have pointed out one of yours and my commonalities dear. I thought liberals like you and me love those entitlement programs dear. I know all about ramming bills through. Although I can't tell you much about the healthcare bill I didn't bother to read it.

Pretty much across the board, economic analysts recognize the new deficit agreement will hurt economic and job growth, and therefore make a double-dip recession that much more likely.

Tanking the economy would seem to be in no one's interest, but Kuttner points out: "Despite three years of a bad real economy, Wall Street's executives are doing better than ever. So it doesn't seem to bother Wall Street that the rest of the economy's going down the toilet."

As wealthy investors and corporations operate more and more on a global scale, they become less concerned about the health of the U.S. economy and more concerned about U.S. taxes.

"I'd say the social contract has broken down, domestically, because so much of our production is now being outsourced," Johnson said.

Some supporters of deficit reduction are so adamant, Johnson said, that they may be willing to see and seize an opportunity in crisis, it even if the immediate, direct consequences will be grim. "When people's backs are against the wall, that's when you can push them to do things they wouldn't do," he said.

Those who favor massive deficit reduction may well think, "We'll never be able to do it in a time of expansion," said Robert Pollin, an economist at the University of Massachusetts at Amherst.

Davig, the investment banker, said economic growth is not the most significant issue for Wall Street.

"Everyone can live with a little bit of fiscal drag if there's a little bit more stable macro landscape," he said. "They're happy to live with a little bit of fiscal drag."

And Galbraith said he thinks some of the super-rich out there, sitting on all that cash, are actually hoping for the economy to crash and burn.

"The strategy of pursuing a deflationary strategy is a strategy that greatly benefits people with cash," said Galbraith. "If you're interested in deflating asset values, and you have cash with which to buy assets when things hit rock bottom, then you have a powerful interest in a deep depression."

"That's certainly consistent with the banks holding 1.4 trillion [dollars] of reserves, which is absolutely unprecedented," said Pollin, who backs a tax on excess reserves. "That's 10 percent of GDP."

no, I'm afraid things like this cannot be said in a 2 second sound bite, much as we Americans would like everything neat and clean and easy to digest. I'll tell you what, though - the global elite will eat your lunch and throw you the bones..

Employees of the small municipal airports which may close are crying about losing their jobs. Did you know that the taxpayers subsidize those airports to the tune of $2,000 TO $4,000 PER TICKET SOLD? We have to stop the outrageous pork projects NOW.

Yes, and what about those rural roads where you get maybe one car every two hours, where you can safely drive a herd of cattle across without having to stop and look. Maybe in your world we should stop paving them too. And maybe we should stop subsidizing rural electrification while we're at it.

"The people who do fundraisers are the people who don't want to pay taxes," Johnson said.

Politicians "spend an awful lot of time calling people with assets," said Robert Borosage, co-director of the Campaign for America's Future, a liberal think tank. "You don't spend a lot of time with people who aren't affluent, and you certainly don't have extended discussions with them about economic policy." Over time, Borosage said, "you develop a set of self-justifying rationalizations," he said.

It helps that the Washington elite hasn't suffered from the financial downturn much, if at all, Palley noted. "There's no doubt that they live in a bubble," he said. "They're not feeling the pain that the country is feeling."

Then there are the groups that Galbraith calls the "Washington agitprop operations," which have been working for years to create and propagate a reflexive distrust of deficits.

Lead among them is former investment banker Peter G. Peterson's eponymous foundation, home of a billion-dollar campaign to force Washington to confront what it calls the nation's "gargantuan longer-term structural deficits."

"[Peterson]'s been screaming that the sky is going to fall for decades," said Borosage, adding, "if you put up a billion-dollar institution you can buy an awful lot of folks."

The foundation holds swanky fiscal summits for pillars of the Washington establishment. It oversees a media empire that has produced its own documentary, funds its own news outlet and underwrites financial coverage elsewhere.

The Democrats have their own banker-funded deficit-hawk proselytizers as well, including the Hamilton Project, founded by former Treasury secretary Robert Rubin, which hosts frequent star-studded events devoted to "long-term prosperity."